These are to be found in Great Britain, where the custom exists of dividing their "ordinary" (which corresponds to the American "common") stock into two other classes. The principle was first introduced after the panic of 1845, which was the result of an over-speculation, in railway securities.

The usual "splitting" of stock means a division into a certain amount of "preferred," bearing a fixed non-accumulative rate of dividend, and a like amount of "deferred ordinary," having a claim upon the balance of the profits. In those companies where the "splitting" is at the option of the holder, there may result three classes - the undivided "ordinary" retained by the holders who prefer the original form of capitalization, and the two classes into which the balance is divided.

There is one road, however, which has four stocks outstanding in place of the original issue.

The argument in favour of this plan is based upon the supposition that the "preferred" is a safer investment, and the other class subject to a more speculative demand, resulting in a total market price of the divided stock greater than that of the original issue. The securities are, likewise, supposed to be more salable in the divided form. It may lead to certain abuses among which would be " watered " capital. Where the par value of the divided stock does not exceed that for which it has been exchanged, there is no "water" injected into the enterprise, but if we have such an instance as that of the Midland Railway, which substituted for its "ordinary" stock "preferred " and "deferred" stocks, each equal in amount to the original issue, we have an unmistakable case of overcapitalization.